by Emmanuel Joseph
The Barbados Government was advised this afternoon, it would have to cut expenditure by an estimated four per cent of Gross Domestic Product, or nearly $400 million, in order to protect the foreign reserves and value of the local currency.
Speaking to Barbados TODAY at the end of a national economic consultation at Hilton Barbados, Governor of the Central Bank of Barbados, Dr. Delisle Worrell said the amount of foreign reserves coming into the island for the first six months of this year was significantly less than what was expected.
“So it means there is going to be a need to readjust the expenditure. So the Government is going to have to reduce the fiscal deficit,” Worrell suggested.
“The anchor of our macro-economic policy is the protection of the value of the currency. For that you need to build up the level of foreign exchange…, maintain the level of foreign exchange. That is something we have been able to do successfully, ever since the onset of the recession.”
Noting that the level of foreign reserves was a little higher at the end of December last year, than at the time of the crisis, he said “what has happened is, in the first six months of the year, the amount of foreign exchange that has been coming in, is significantly less than was expected”.
Worrell also pointed out that apart from expenditure, the consultation examined economic growth and the kind of investment which was required by the Government and private sector.
“The things that we can do are to accelerate the projects that are already in the pipeline, the work that Government could do to facilitate the projects that are onboard to get them moving ahead as soon as possible; our financing challenges …, there is a lot of financing available, [we need] to get more channelled to equity, and into long-term financing. And the things we are doing to diversify our international business sector, while defending our position in the Canadian market.
“Our part of the conversation,” the governor continued, “was to say what is the order of magnitude of investment that we need to be doing, mainly on the part of the private sector — It’s a private sector-led plan — to secure growth in 2014, 2015, 2016 and 2017.”
Worrell said that under this plan, the Central Bank expected to see some level of growth. He added that the projected level of investment required, was about $2.3 billion, both domestic and foreign, over the four year period.
Minister of Finance Chris Sinckler said the adjustment in expenditure was needed until the economy picked back up. He added that the adjustment in spending of $370 million would be spread over time and could be determined according to what the adjustment period was.
“Of course Finance (Ministry) and Central Bank, Economic Affairs and the various line ministries and the sector stakeholders are looking at the numbers to see how we get there and the combination of measures required and over what duration.
The Finance Minister also suggested that the issue was not only the type of adjustment on the deficit, but the kind of measures and period of time.